How Dunwoody-based Krystal burger chain ended up in bankruptcy court Dunwoody-based Krystal had big plans to grow its business of tiny square burgers. But the chain filed for federal bankruptcy court protection over the weekend; a hearing is scheduled for Wednesday. As it attempts to right its financial troubles, Krystal said in an emailed statement that it “will remain open and operating as usual.” It said it “plans to pursue an orderly sale of its business and assets as a going concern.” In its Chapter

How Dunwoody-based Krystal burger chain ended up in bankruptcy court

Dunwoody-based Krystal, one of the nation’s oldest fast-food chains, had big plans to grow its business of tiny square burgers.

It didn’t work out: The chain filed for federal bankruptcy court protection in Atlanta over the weekend, with a hearing slated for Wednesday.

As it attempts to right its financial troubles, Krystal said in an emailed statement that it “will remain open and operating as usual.” It said it “plans to pursue an orderly sale of its business and assets as a going concern.”

The chain has shuttered dozens of restaurants in recent months and now has just shy of 300 corporate and franchise locations, primarily in the Southeast. In its Chapter 11 bankruptcy filing, the company asks to be released from lease obligations for as many as 78 restaurant sites, some where it had already shut down operations, such as one in the Buford area, and others that remain open, including certain locations in Cartersville, Brunswick and Dawsonville.

“We look forward to emerging from this process as quickly and efficiently as possible with the support of our valued customers, team members, franchisees and suppliers,” Krystal president Tim Ward wrote in a release.

Founded in 1932, the chain touts itself as the nation’s second oldest fast-food brand. In recent years, it moved its headquarters from Chattanooga to Dunwoody, where it has about 50 employees.

In 2018, Krystal unveiled a revitalization effort to boost sales and profits that had been declining for years. Armed with fresh funding and a newly hired chief executive, Krystal rebuilt nine restaurants and launched a new marketing pitch — “Live a little” — that highlighted its thin-burgers. It sought new franchisees and offered a limited-time, $5.99 All-You-Can-Eat Krystals and fries option.

“Fundamentally, in this business, if you’re not growing, you’re dying,” then-CEO Paul Macaluso told The Atlanta Journal-Constitution in 2018.

The company was profitable, he said, but without a planned reinvestment, “it’s scary. … Is it really going to be here five or 10 years from now?”

Krystal offers inexpensive food at a time when many fast-food consumers are demanding better ingredients, improved taste and more premium offerings.

Though the company boasted about sales gains less than a year into the remake, it still had financial issues. It failed to comply with stipulations tied to borrowed money, even as it needed to borrow more, according to court filings.

Last fall, Macaluso left. The company brought in its fifth chief executive officer since locally based Argonne Capital Group bought the company eight years ago. Leaders continued to cut costs, eliminating jobs, shedding senior executives and shuttering more restaurants, according to the company’s court filings.

Krystal filed for bankruptcy protection the day that one of its agreements with lenders expired.

In the midst of its financial troubles, the chain also said it was hit by “a security incident” involving a payment processing system used at some of its restaurants. The issue may have involved payment cards used at certain Krystal restaurants between July and the end of September last year, according to court filings.

The investigation is continuing, and the company said it is trying to determine which restaurants and dates were involved in the attack.

Krystal chief restructuring officer Jonathan Tibus said the restaurant industry has faced “headwinds due to a combination of shifting consumer tastes and preferences, growth in labor and commodity costs, increased competition and unfavorable lease terms. The proliferation of fast casual restaurants, as well as online delivery platforms, has created new competition for traditional quick-service chains. Moreover, quick-service restaurants have faced increasing difficulty finding and retaining qualified employees in the current labor market.”

Krystal employs nearly 5,000 employees, mostly part-time workers. It listed assets in a range of $10 million to $50 million, and liabilities in a range of just more than $50 million to $100 million.

Among its biggest creditors listed in court documents are Radiant Systems in Atlanta and Flowers Baking in Thomasville, Ga., which makes buns for the chain.

The company has a hotline for information about its restructuring efforts, 888-249-2792, and additional information is available at http://www.kccllc.net/krystal.

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